How expensive is housing in the US?

An examination of the cost of housing in the US over time.

WarningWork in Progress

I am actively updating this post. Content will change as I work my way through this article.

tl;dr

Things are bad, but not as bad as you might think.

At a national scale,

• From January 1953 to January 2026¹, the price-to-income ratio of a home has increased by 2.85 percentage points (pp) per year on average. As of January 2026, the ratio stands at 4.51², placing it in the 73rd percentile of all observations in this period.
• From April 1971 to January 2026, the mortgage debt-to-income ratio has decreased by -0.14 pp per year on average. As of January 2026, the ratio stands at 0.26³, placing it in the 46th percentile of all observations in this period.

¹ Some of the most recent data used to compute these metrics come from forecasts. See Table 1 for details on the range of the underlying data.

² Meaning the typical house costs the typical household 4.51 \(\times\) their gross annual income

³ Meaning the typical household would spend 0.26 \(\times\) their monthly income on the typical mortgage. This calculation assumes only interest and principal.

intro

Much has been written recently on housing affordability, with much of it being negative.⁴ Aside from the tendency of news organizations to produce negative content, I think what is lost in these reports is historical context: where were we, and where are we now? Even when the historical context is present, metrics may be used that, if not interpreted carefully, can be misleading. For instance, longtermtrends.com gives a chart that shows the ratio of the S&P/Case-Shiller Home Price Index to the median household income. This index is used a lot since it’s high-quality and has data that dates back to 1890. However, the problem here is that the Case-Shiller index is a weighted average. The distribution of home values tend to be right skewed, so an average will be greater than the median (the typical house). So, dividing the average by the median produces a price-to-income ratio that is a bit more pessimistic. The typical person is buying the typical house, not the average house.

⁴ Here’s a few: CBS, NBC, and FOX.

In order to provide some clarity on the question of housing affordability, I’m going to look at four metrics in particular:

1. The real⁵ median home price over time.
2. The real median household income over time.
3. The ratio of the typical cost of a house to the typical household income. In this article, I’ll refer to it as the price-to-income ratio.
4. The proportion of a person’s monthly income that would be dedicated to their monthly mortgage. For my analysis, this will be limited to only interest and principal⁶, and will assume a 20% downpayment, so a loan on 80% the value of a house. I’ll refer to it as the debt-to-income ratio in the article.

⁵ 2026 dollars

⁶ I’m interested in having a better picture of this by incorporating property taxes and home insurance costs if someone could get me the data…

The last two metrics are the most important and incorporate the top two. However, the top two can give us better context in and of themselves.

analysis

I’m planning to examine this at three different geographic scales:

• national
• state
• county

national scale

the data

The data I’m using is mostly from the FRED. I’ve supplemented some of these series with data extending further back to get a more complete picture. Below are the data series and where I got the supplemental data:

• CPIAUCSL: Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• MEHOINUSA646N: Median Household Income in the United States
  • Years 1947-1965 are from p.877 of a US Census Bureau publication.
  • Years 1967-1983 are also from the US Census Bureau
• MORTGAGE30US: 30-Year Fixed Rate Mortgage Average⁷ in the United States
• MSPUS: Median Sales Price of Houses Sold for the United States
  • Years 1953-1962 are from few different indices⁸ that have been combined. The author explains the process here.

⁷ Unfortunately, there is no high-frequency median equivalent to this data that I know of. Fortunately, there are some restrictive filters (e.g. 20% down, excellent credit, excluding jumbo loans) on which data to use that removes large outliers making the mean more centered. See here for more details

⁸ The NAR Median Sales Price of Existing Homes, Shiller’s NSA Home Sale Index, and the FHFA’s NSA Existing Home Sale Index

Let’s take a look at the data below:

Figure 1: National housing and economic indicators over time. Dollars are in nominal terms. Hover over the lines to see specific values.

There are a few things that need to be handled before analysis:

1. The data is captured at different frequencies.
2. Not all the data is recent.⁹

⁹ The 30-year fixed mortgage rate is the most egregious offender. The reason for this, is that Freddie Mac began surveying lenders on mortgage rates in April 1971, making this the earliest date for which consistent, nationwide data is available.

Table 1: Latest data points retrieved for each national economic series.

series	collection frequency	oldest observation	newest observation
30-year fixed mortgage rate	weekly	April 2, 1971	January 15, 2026
consumer price index	monthly	January 1, 1947	December 1, 2025
median home price	quarterly	January 15, 1953	April 1, 2025
median household income	annually	January 1, 1947	January 1, 2024

To account for (1), I put everything in a monthly frequency. Cubic splines were used for quarterly and annual data, while weekly data was averaged. For (2), I first smoothed each series using LOESS then modeled each series using ARIMA to produce estimates for the most recent date available (January 2026). These estimates should be taken with a grain of salt, though I include \(3 \sigma\) prediction intervals to capture the uncertainty.

Figure 2: Harmonized and smoothed economic indicators over time. Green line shows the smoothed series. Gray line shows the raw series. Dollars are in nominal terms. Hover over the lines to see specific values.

These smoothed indicators are used to calculate the metrics in the following sections.

the metrics

real median home price

Let’s put the nominal median home price in 2026 dollars. I’ll include a linear model to help us understand the trend over time.

Figure 3: Real median home prices (2026 dollars) over time. Monthly forecasts with 3\(\sigma\) prediction interval. Linear model with 3\(\sigma\) confidence interval. Hover over the lines to see the percentile of the observation and ranges for forecasts.

From January 1953 to January 2026, the real median home price has increased by $3,462 per year on average. This translates to roughly 1.57 pp per year. As of January 2026, the real median home price stands at $417,986, placing it in the 90th percentile of all observations in this period.

What complicates this analysis is that the typical house from the 1950s looks much different than the typical house from today. Across the decades, houses look pretty different, whether that be square footage or amenities. To get a visual sense of these differences:

The “rambler” (a ranch house) was the most popular style of home for new builds in the 1950s. The home pictured has 3 beds, 1 bath, and is 1,234 square feet (excluding the 1-car garage). Images from Town and Country Homes to Fit Your Budget, 1954 p. 60-61.

The modern farmhouse is considered one of the most popular styles of home for new builds in the 2020s. The home pictured has 3 beds, 2.5 baths, and is 1,959 square feet (excluding the 2-car garage). Images from Architectural Designs.

Figure 4: Visual comparison of popular homes from the 1950s and 2020s.

A few key figures on these differences:

Table 2: Comparison of housing features from 1950s to 2020s

feature	1950’s home	2020’s home
median size	under 1,000 sq ft	over 2,000 sq ft
complete plumbing	66%	99%
air conditioning	under 2%	over 90%

Andrew Latham did a great analysis on housing affordability where he found that the price per square foot of a house (ignoring amenities) from 1978-2023 grew by 20% which works out to roughly 0.44 pp per year which is about 28% the rate of house prices in general.

Of course the problem in all this is you can’t buy a 1950’s new-build today¹⁰; the option for a smaller, less feature rich house just isn’t available today as it was in the past. Those aren’t the houses being built, so buyers are left with nicer, larger¹¹, and more expensive houses.

¹⁰ Not that anyone would want to!

¹¹ Ironically, households have been shrinking over the same time that houses have gotten larger. However, the median square footage of new builds has been decreasing over the last decade.

Fortunately, we are coming out of a bubble which peaked in early 2022, so prices are cheaper today than a few years ago. However, unless housing policy/supply changes, we should expect housing to get more expensive.

real household income

Let’s put the nominal median household income in 2026 dollars. I’ll include a linear model to help us understand the trend over time.

Figure 5: real median household income (2026 dollars) over time. Monthly forecasts with 3\(\sigma\) prediction interval. Linear model with 3\(\sigma\) confidence interval. Hover over the lines to see the percentile of the observation and ranges for forecasts.

From January 1947 to January 2026, the real median household income has increased by $398 per year on average. As of January 2026, the real median household income stands at $92,742, placing it in the 100th percentile of all observations in this period.

There are three periods worth focusing on in Figure 5: Mid 1948 - late 1964, late 1964 - early 2012, and early 2012 - today. These periods are marked by significant growth (4.3 pp/year), little to no growth (0.02 pp/year), and substantial growth (1.88 pp/year), respectively. Let’s examine each of these periods in turn.

Mid 1948 - late 1964

This period saw significant growth over a brief period of time. From June 1948 to December 1964, real median household income grew from $42,496 to $72,636 representing an annual growth of 4.3 pp per year. NEED DETAILS ON ECONOMIC CONDITION.

Late 1964 - early 2012

This period saw little to no growth. From December 1964 to January 2012, the real median household income only grew to $73,436 representing an annual growth of 0.02 pp per year. Of course there were highs and lows over this period¹², but overall growth was stagnant. Further analyzing this period becomes nebulous quickly. Analysis by the Urban Institute (a left-leaning think tank) have found that when you include all payments (e.g. benefits from employer), from 1979 - 2013 real income grew by roughly 1.1 pp per year. Furthermore, when you break up the analysis by different demographics (age, gender, education, etc.) you see some groups had significant growth (60+, women, higher education) while others lagged behind (25-34, men, less than BA).

¹² The peak income over this period was reached on July 1999 at $81,120 representing a growth of 0.34 pp per year. The lowest income over this period was reached on June 1982 at $69,180 representing a decline of -0.14 pp per year.

Early 2012 - today

This period has seen substantial growth. From January 2012 to January 2026, the real median household income grew to $92,742 representing an annual growth of 1.88 pp per year. NEED COMMENTARY ON HOW THIS GROWTH RELATES TO AVERAGE GROWTH IN HOUSING COST. NEED DETAILS ON ECONOMIC CONDITION.

price-to-income ratio

We can use nominal dollars to calculate the price to income ratio. I’ll include a linear model to help us understand the trend over time.

Figure 6: Ratio of median home price to median household income over time. Monthly forecasts with 3\(\sigma\) prediction interval. Linear model with 3\(\sigma\) confidence interval. Hover over the lines to see the percentile of the observation and ranges for forecasts.

From January 1953 to January 2026, the price-to-income ratio of a home has increased by 2.85 percentage points (pp) per year on average. As of January 2026, the ratio stands at 4.51¹³, placing it in the 73rd percentile of all observations in this period.

¹³ Meaning the typical house costs the typical household 4.51 \(\times\) their gross annual income

debt-to-income ratio

Figure 7: Ratio of monthly mortgage to monthly income over time. Monthly forecasts with 3\(\sigma\) prediction interval. Linear model with 3\(\sigma\) confidence interval. Hover over the lines to see the percentile of the observation and ranges for forecasts.

From April 1971 to January 2026, the mortgage debt-to-income ratio has decreased by -0.14 pp per year on average. As of January 2026, the ratio stands at 0.26¹⁴, placing it in the 46th percentile of all observations in this period.

¹⁴ Meaning the typical household would spend 0.26 \(\times\) their monthly income on the typical mortgage. This calculation assumes only interest and principal.